USAUnderstanding the Tax Implications of Registering Your US Company with a Bank Account

September 1, 2023by Tetra Consultants0
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  • The United States (US) banking system is a very crucial part of the financial economy of the country. The banking industry’s performance has implications for financial stability over the globe. During registering a US company with a bank account the most crucial consideration is the tax implications. The US is worldwide known for its leaders in various fields ranging from technological advancements to a large consumer base. For any business to start its operation the owner needs to register company in USA. It is not easy to enter the US market because of the lucrative market and complex regulations and procedures. 
  • S&P Global report takes a look at the short interests across the US banking sector which have contributed to the rise and recent fall of regional banks in the US that has a continuous and serious effect across the globe’s financial economy. The report further indicates that the US bank in Q1’23 examines the liquidity crunch which is faced by many banks that subsequently resulted in the second and third largest bank present in the US economy. Moreover, the Federal reserve board also determines the short-term risks which may endanger the US financial system including the US dollar funding market, asset market, financial market, and US real economy. The report highlights the financial system importance and the crucial role of financial institutions which may affect the associated economies worldwide. 
  • As seen through many reports, the fall in financial institutions has made more rigid laws and regulations for US companies. The bank ruled and regulations have been tightened for mid-sized banks whose assets range from $100 billion to $250 billion. There has been a rollback of regulations that affects the small banks in the state since 2018. The rollback changes were implemented to reduce the regulatory burden on smaller banks. The collapse of large banks such as Silicon Valley Bank(SVB) and Signature Bank has created pressure on the global banking system. The pressure has resulted in restructuring the rules of the banking system to eliminate future risks. 
  • These changes have resulted in various tax implications applied to US companies. There are various factors that are considered while determining the tax implications which include double taxation, startup tax deduction, and various other considerations. Tetra Consultants can help you with the understanding and knowledge of various business growth strategies and measures which can be beneficial for business growth and expansion. Our tax associates and experts have years of experience in advising our clients on their various tax concerns. 

Tax implications to be considered are as follows: 

While registering a US company with a bank account there are various tax implications which are needed to be considered. Here are the following points needed to keep in mind: 

Double Taxation: 

  • There are many corporations in the US that charge tax from their owners and shareholders separately and this might result in double taxation. This facilitates the banking institutions’ profit which is directly subjected to the corporate income tax and also the dividends which are distributed to many shareholders are also applicable to be charged as a personal income tax.   Though there present many other ways through which this double taxation can be less of less difficulty but, still it is a hard pill to swallow.

FinCEN Form 114

  • Since the foreign bank account Is taxable under the US taxation law. The treasury of the US is very rigid and the process of declaring the overseas assets is very complex. Any US-registered company needs to report such accounts to the Treasury Department which has a total of more than US$10,000 in aggregate or anytime during the year with any of the foreign banks. Moreover, US-registered companies require to report any earnings or deposits in foreign accounts and pay tax on all incomes from these foreign accounts except for the so-called “signature authority accounts”. Those legal entities who have offshore accounts totaling more than US$10,000 need to electronically fill out the financial crime enforcement network form (FinCEN) form 114 which is mandatory to disclose the information and which has to pass through the treasury bank secretary act E-filing system. It does not replace any income tax filing but it just helps in separate documents to be submitted individually.  

Corporate tax 

  • As soon as the company registers in the US registrar its net profits are assumed to be taxable. Thus, the opening of the corporate bank account in the US implies that the company has to file its corporate taxes in the US, The corporate income tax is the third largest source of income for federal revenue in the US. The Tax Cuts and Jobs Act, of 2017 has lowered the corporate rate to 21% for the US population. There are various other instituted changes that effectively reduce the corporate income and other taxes by most multinational corporations with income generated from the US and other foreign sources.

Report of foreign bank and financial accounts (FBAR) 

  • The report of foreign bank and financial account (FBAR) Is obtained through the foreign financial account, such as bank accounts, brokerage accounts, and mutual funds to the Treasury Department which keeps and maintains the record of those accounts in the report. The filing of reports of foreign banks and financial accounts on financial crimes enforcement network form 114 has been a way for legal entities and US residents to report their earnings and saving in foreign bank accounts. It has been made mandatory according to the foreign account tax compliance act which requires that the foreign banks report account information of U.S. citizens to the IRS. Thus, those U.S. citizens who have foreign bank accounts whose total is amounting to $10,000 are required to report these accounts to the Treasury Department of the US and pay tax on the income generated through these accounts for them. 

Conclusion: 

  • There are various rules and regulations and tax compliances which are needed to be complied with by the US company with a bank account. There exist various tax implications such as double taxation, regulations regarding the US taxation which includes double taxations, reports of foreign bank and financial accounts, taxable net profit by the U.S. company with a bank account, financial crime enforcement network form (FinCEN) form 114, filing of statements and documents with the treasury bank secretary act E-filing system, corporate taxes along with there exemptions. Tax compliances are needed to be fulfilled in order to execute US-registered companies. 
  • Contact us to know more about the tax implications of registering US company with a bank account and our team of experts will revert within the next 24 hours. Tetra Consultants are always ready to assist and administer you by helping you to develop, commence, or execute your business in a more hassle-free way. Our dedicated team of staff members is experienced and knowledgeable to navigate you through the tax regulations of the USA. Tetra Consultants also provide various other ancillary services such as offshore company incorporation, offshore financial licenses, international trademark registration, and many more ancillary services. 

Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at enquiry@tetraconsultants.com for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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